Real estate developers on Friday welcomed RBI’s decision to lower risk weightage on housing loans, saying it would boost credit flow to the sector, but demanded more steps to revive the industry.
The RBI decided to rationalise risk weights by linking them only with LTV (Loan to Value) ratios for all new housing loans sanctioned up to March 31, 2022. With lowering of risk weightage, the requirement of capital provision for banks will come down.
CREDAI National President Satish Magar said linking of housing loans to LTV would boost housing demand.
The move to extend co-lending scheme to non-banking financial companies (NBFCs) and housing finance companies (HFCs) may infuse additional liquidity, he said, but added that realty sector might not get benefit due to strict due diligence norms and eligibility criteria.
“Now that RBI has recognized realty sector as the largest employer, it should also announce steps that are imperative and crucial for the sector’s survival and then introduce measures that will aid the sector’s revival,” Magar said.
He sought that all loan accounts that were SMA 1 & SMA 2 as on March 1, 2020 should be made eligible for restructuring.
Naredco President Niranjan Hiranandani said RBI’s decision will give a boost to the sector.
“Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers. This move is a much appreciated step recognising the role of real estate sector in generating employment and economic activity,” he added.
Anshuman Magazine, Chairman & CEO – CBRE India, South East Asia, Middle East & Africa, said, “RBI’s decisions to relax LTV guidelines and rationalize risk weights for home loans will further encourage homebuyers.”
Anarock Chairman Anuj Puri said the announcement will definitely encourage banks to lend more to individual homebuyers without feeling the stress on their balance sheets.
PropTiger and Housing.Com CEO Dhruv Agarwala said it will effectively result in higher credit flow to real estate sector.
Square Yards CEO Tanuj Shori said, “The linking of risk weightage only to LTV ratio vis-a-vis the earlier practice of risk weightage with both pricing and LTV augurs well for the sector, particularly for high end properties which have been facing severe downward demand pressures.”
Welcoming the move, Hardayal Prasad, MD & CEO, PNB Housing Finance said rationalising risk weights for all new housing loans until March 31, 2022 and the relaxation extended for LTV shall give the much needed impetus to housing sector.
“At the same time, home loans will become accessible and competitive for customers. This move by the central bank addresses the urgency required to boost real estate sector in the country. This will also lead to the desired recovery of construction sector which has a very important role to play in creating employment and growth,” Prasad said.
JLL India CEO and Country Head Ramesh Nair termed the move as timely and a step in the right direction.
Knight Frank India CMD Shishir Baijal said measures like rationalisation of risk weights to all new housing loans would give a fillip to housing loan growth.
RBI has extended the scheme for co-lending to all NBFCs and HFCs which will ease credit availability for the real estate sector, he added.
LIC HFL MD & CEO Siddhartha Mohanty said that in recognition of the role of real estate sector in generating employment and economic activity, it has been rightly decided to rationalise risk weights and link them to LTV ratios for all new housing loans sanctioned up to March 31, 2022.
Savills India CEO Anurag Mathur said rationalisation of risk weight of housing loans is a welcome step by RBI that could potentially boost housing demand.
“With this move, housing loans would eventually get more affordable, thereby benefiting the homebuyers in this sluggish market,” he added.
Emami Realty MD & CEO Nitesh Kumar said RBI’s move will boost credit sentiment and bring much needed positivity in the sector.
Sunteck Realty CMD Kamal Khetan said homebuyers across all price points will be able to access more capital with ease.
Gaurs Group MD Manoj Gaur said the lowering of risk weightage on home loans and linking it to LTV only will ensure more credit to customers and thereby to the sector.
Signature Global Chairman Pradeep Aggarwal said the loan on LTV will be helpful for real estate sector.
S Raheja Realty Director Ram Raheja said it will provide much-needed boost and encouragement to home buyers ahead of festive season.
Honeyy Katiyal, founder, Investors Clinic said the announcement by RBI to extend the scheme for co-lending to all NBFCs and HFCs will help ease credit availability.
“The move by RBI to link risks to LTV will help banks shred the cautious lending approach. The move is bound to offer a much needed jump start to lending and liquidity cycle,” said Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory.
RBI’s stand to rationalise risk weightage on home loans is a step in the right direction and homebuyers will benefit immensely from it, said Ankush Kaul, President (Sales & Marketing) – Ambience Group.
Jyoti Prakash Gadia, Managing Director, Resurgent India said retail credit and real estate shall also get a fillip with regulatory relaxations announced with an increase in limit to Rs 7.50 crore for retail credit and rationalisation of risk weight linked to loan value for housing loan, respectively.
Aadhar Housing Finance MD & CEO Deo Shankar Tripathi said, “RBI’s move will help lenders directly for loans above Rs 75 lakh which earlier attracted risk weight of 50 per cent. The risk weight for loans up to Rs 75 lakh and LTV of 80 per cent was already 35 per cent. Lending capacity will rise significantly with the same capital in such loans of over Rs 75 lakh.”
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Credai Chairman (east region) Nandu Belani welcomed the move and said the proportion of home sales above Rs 75 lakh would be no more than 20-30 per cent in Kolkata, but would be higher in markets like Mumbai.